I think the ubiquity of semiconductors in production but their connection to trade secrets makes them a rare exception in the protectionism debate. The fact that both semiconductors are in everything and they're made almost entirely by TSMC in Taiwan makes diversification important. Interestingly, Taiwan is using this advantage to protect themself—China is hesitant to invade Taiwan because the Chinese would lose critical components in their manufacturing, and the US feels an obligation to protect Taiwan at all costs, or risk the destruction global supply of semiconductor manufacturing in a war with China.
Great post. You raise many good points; it's hard to know that our pocketbook is being hit because tariffs can often be invisible. One quibble I have is that it seems like you're comparing apples to oranges. You're saying that national security tariffs are expensive, but would the opposite side even dispute that claim? I don't think they would; instead, I'd imagine that they would accept that cost as a necessary trade-off worth making in order to protect national security. It seems like the question is whether national security tariffs actually protect national security, or if they more expensive than they are worth, or whether there are other ways of achieving the same goals.
They would probably agree that it's a "necessary tradeoff," but they do not advertise that tradeoff because significantly re-shoring manufacturing like many pundits (on the left and right) are saying would cost Americans far more than they realize. What I may make a post about sometime is that while for a few key industries I am in favor of re-shoring some production (semiconductors come to mind), most manufacturing should not be re-shored, even ones that seem like they have to do with defense (such as steel). And the larger point is that even allowing some national security protections for industries opens the door to all kinds of rent-seeking companies to get their industry or product protected under the guise of national security.
Also for things like semiconductors I think subsidies are more appropriate than tariffs.
I was reminded of this post when I saw this article: https://www.nytimes.com/2022/07/14/briefing/semiconductor-bill-congress-biden.html
I think the ubiquity of semiconductors in production but their connection to trade secrets makes them a rare exception in the protectionism debate. The fact that both semiconductors are in everything and they're made almost entirely by TSMC in Taiwan makes diversification important. Interestingly, Taiwan is using this advantage to protect themself—China is hesitant to invade Taiwan because the Chinese would lose critical components in their manufacturing, and the US feels an obligation to protect Taiwan at all costs, or risk the destruction global supply of semiconductor manufacturing in a war with China.
Great post. You raise many good points; it's hard to know that our pocketbook is being hit because tariffs can often be invisible. One quibble I have is that it seems like you're comparing apples to oranges. You're saying that national security tariffs are expensive, but would the opposite side even dispute that claim? I don't think they would; instead, I'd imagine that they would accept that cost as a necessary trade-off worth making in order to protect national security. It seems like the question is whether national security tariffs actually protect national security, or if they more expensive than they are worth, or whether there are other ways of achieving the same goals.
Thank you!
They would probably agree that it's a "necessary tradeoff," but they do not advertise that tradeoff because significantly re-shoring manufacturing like many pundits (on the left and right) are saying would cost Americans far more than they realize. What I may make a post about sometime is that while for a few key industries I am in favor of re-shoring some production (semiconductors come to mind), most manufacturing should not be re-shored, even ones that seem like they have to do with defense (such as steel). And the larger point is that even allowing some national security protections for industries opens the door to all kinds of rent-seeking companies to get their industry or product protected under the guise of national security.
Also for things like semiconductors I think subsidies are more appropriate than tariffs.